Jakub Growiec (SGH Warsaw Sch. Econ.), Klaus Prettner (Vienna U. Econ. & Bus.) & Maciej Szkróbka (SGH Warsaw Sch. Econ.), ⁠Workers’ Incentives and the Optimal Taxation of AI (Mar. 18, 2026):

We characterize the optimal tax policy in an economy with human manual and cognitive labor, physical capital, and artificial intelligence (AI). Extending the dynamic taxation setup of Slavik and Yazici (2014), we find that it is optimal to start taxing AI when cognitive workers start to consider switching to manual jobs. This threshold may be crossed once AI becomes sufficiently capable in substituting humans across cognitive tasks.

Conclusion:

When AI becomes a good substitute for human cognitive work and its adoption drives down the wages of cognitive workers relative to manual workers, cognitive workers may find it optimal to seek manual jobs. In such a scenario, it is optimal to tax AI capital and to subsidize traditional capital and manual labor. This is an important new result of dynamically optimal taxation for the age of AI. The potential reversal of manual vs. cognitive workers’ incentives constitutes another critical threshold in AI development, other than human-level AI performance at benchmarks or the threshold where human cognitive work and AI become gross substitutes.